Earlier this week, Housing First Minnesota hosted Charlie Durenberger, director of licensing and enforcement at the Minnesota Department of Labor & Industry (DLI). Durenberger spoke at the Builder and Remodeler Roundtable which focused on the state's Contractor Registration Program.
The Contractor Registration Program was created by the legislature to assist DLI in its investigation of worker misclassification (treating employees as independent contractors). By law, an unregistered “subcontractor” is presumed to be an employee of any contractor that hires them.
The hiring contractor can rebut this presumption if they can prove that the relationship between them and the subcontractor complies with all nine factors of the Nine Factor Test. Hiring an unregistered subcontractor is a violation of law, though the monetary penalty is forgiven for the first violation.
Even if your subcontractors are registered, your relationship with them must meet the Nine Factor Test or they will be deemed to be employees of your company even if they operate as a business entity (corporation or LLC) and maintain their own liability and workers’ compensation insurance.
Who Needs To Register
An individual or business entity that performs commercial or residential building construction or improvement services must register with DLI unless they:
- have a current license, certificate or registration issued by DLI;
- are an employee of a business performing construction services; or
- hold a current residential building contractor or remodeler certificate of exemption issued by DLI; or
- were excluded from registration requirements by state law. Subcontractors not involved in the construction or physical improvement of a home, such as landscapers and cleaners, are examples of contractors not required to register with DLI.
When hiring subcontractors, be sure to verify that the subcontractor is properly registered or licensed with DLI. Contractors can check on the status of subcontractor’s license or registration
What Do I Need To Do When Hiring Subs?
- Know the legal name of the business.
- Verify the business filing is active (Secretary of State).
- Verify the sub is licensed or registered (DLI).
- Enter into contracts with the sub's business entity.
- Ask for written invoices.
- Make payments to the business, not to individuals.
- Pay by the project, not by the hour.
- Ensure sub meets all factors of the Nine Factor Test.